After five-day surge, D-Street slips through ceasefire cracks

Mumbai: Cracks appearing in the US/Israel and Iran truce within a day of its announcement soured investor sentiment on both Dalal Street and the rest of Asia on Thursday, leading to participants booking gains made earlier. The Nifty 50 and Sensex both ended about 1% lower, breaking a 5-day upwards streak, in light of the recent geopolitical developments.

NSE's Nifty fell 222.25 points, or 0.9%, to close at 23,775.1. BSE's Sensex declined 931.25 points, or 1.2%, to end at 76,631.65. Both indices were up nearly 4% in the previous session.

"Following Wednesday's sharp rally, markets witnessed profit booking amid renewed uncertainty around ceasefire developments, which triggered a spike in crude oil prices. This has led to cautious sentiment, with participants in a dilemma about how the conflict may pan out," said Sunny Agrawal, head of research at SBI Securities.

Tensions have resurfaced in West Asia just a day after the US and Iran announced a ceasefire as Israel continues to attack Lebanon, and the Strait of Hormuz was reportedly shut again.

Agencies

Brent Crude June Futures were trading close to $99 a barrel on Thursday evening, after making a low of $90.4 on Wednesday.

Technically, the Nifty 50 is likely to find support in the 23,300-23,400 range in the coming days, with resistance around 24,500, said Dharmesh Shah, head of technical research at ICICI Securities.

"While the recent swift retracement of losses are a positive signal, intermittent profit booking cannot be ruled out," said Shah. "Volatility is expected to remain elevated amid uncertainty around the ceasefire."

The Indian Volatility Index or VIX - known as the fear gauge of the market, advanced 3.7% to 20.43 levels, suggesting participants continue to remain cautious in the near term.

Broader market indices bucked the trend, as Nifty Midcap 150 gained 0.3% and Nifty Small-cap 250 rose 0.1%. Out of 4,420 stocks traded on BSE, 2,121 advanced and 2,180 declined at close.

Despite the weakness in benchmark indices like the Nifty 50 and Sensex, mid and small cap indices ended higher, suggesting that continued foreign investor selling weighed on the headline indices while overall mood remained positive, said Agrawal.

"Looking ahead, markets are expected to stabilize over the next 2-3 months if oil prices remain in double digits," he said. "Fourth quarter earnings across key sectors such as banking, IT, automobiles, FMCG, and consumer discretionary are anticipated to be positive."

Elsewhere in Asia, Japan dropped 0.7%, China declined 0.7%, Hong Kong fell 0.5%, South Korea declined 1.6%, while Taiwan rose 0.3%.

The pan-Europe index Stoxx 600 was down 0.6% at the time of going to print.

Foreign portfolio investors net sold shares worth ₹1,711 crore. Domestic institutions were buyers worth ₹956 crore.